In a session that remained highly influenced and affected by the weekly options expiry, the equity markets closed on a flat note after coming off over 290-points from its high point of the day.
The market saw a strong start. It grew stronger as the day progressed and marked its day’s high in the morning session. However, the market failed to capitalise on the morning gains. Gradually, Nifty gave up all its gains by later afternoon to dip slightly in the negative zone.
In the end, the headline index ended up closing on a flat note while gaining negligible 5.05 points (+0.03%).
The move that was seen in the previous session looked grossly affected and driven by weekly options expiry. Nifty current month futures have continued adding to its OI. It added fresh OI of over 2.07 lakh shares or 1.93% in net Open Interest.
Taking previous two sessions together, Nifty has added massive OI along with the decline from the higher levels. This indicates a pile up of large short positions in the system. From a technical perspective, Nifty has dragged its resistance point lower over the past couple of days.
The zone of 16,800-16,850 stays important resistance area for the market in the immediate near term.
Friday may see the markets trying a stable start once again. The levels of 16,780 and 16,850 may act as immediate resistance points. The supports come in at 16,600 and 16,530 levels.
The Relative Strength Index (RSI) on the daily chart is 39.47. It stays neutral and does not show any divergence against the price. The daily MACD is bearish and stays below the signal line.
An inside bar occurred on the charts with means the current bar has a lower top but a higher bottom. It also translates in a Harami pattern on the candles where the present body is engulfed by the prior body of the candle.
All in all, the present technical setup warrants that we keep the analysis for the next trading day on the similar lines. Given the kind of shorts that Nifty has added over the past couple of days, it has kept a lot of room to find support at lower or current levels.
It is strongly suggested that one must refrain from adding fresh shorts and continue using each downside to pick good quality stocks. A cautiously positive outlook is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae (ChartWizard, FZE) and is based at Vadodara. He can be reached at email@example.com)